Opportunity costs

One of the best concepts that I learned about in business school was the concept of "opportunity costs".  Opportunity cost basically refers to the loss of the potential value or benefit that you would have received from a choice or alternative that you didn't take. For example, my 6-year-old thinks $1 is a lot of money, expecially if we go into the dollar store.  He will often spend a long time agonizing about whether he should buy a toy (which will be broken before we get home) or a piece of candy.  Once my son decides to buy the candy, the opportunity cost of his decision is the toy that he DIDN'T get.  This usually doesn't cause my son too much anxiety.  What does cause him anxiety is when we go to another store and he sees his favorite bag of chips for, guess how much...$1!  My son quickly realized that the opportunity cost of spending his dollar on candy was also the bag of chips that he didn't know about!

I say all that to say, sometimes, we don't stop to truly examine the opportunity costs of our choices.  At work, we may have a hard time delegating and find ourselves doing a task that can be given to someone else.  What is the opportunity cost of you spending a half hour creating that spreadsheet that your assistant knows how to do?  A missed opportunity for a critical conversation with an employee?  Loss time to work on a project that is due soon? What's great about the concept of opportunity cost is that it applies to ANY of our resources--time, money, attention, etc.--whether at work or at home.  What is the opportunity cost of spending $50 on a new pair of shoes?  What is the opportunity cost of spending the evening watching your favorite television shows?

Whenever we make a choice, we are getting one thing instead of another.  But how often do we stop and contemplate what our choices are really costing us?  I challenge you to start thinking about the opportunity costs of your decisions to help you determine if you are using your resources in the best way.



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